NetSuite’s Vertical Leap

The software company reorganizes around industry verticals, giving its CFO an unexpected benefit.
Kate O'SullivanDecember 8, 2010

When NetSuite went into business in 1998 as NetLedger, it sold a software-as-a-service product that competed with Intuit’s QuickBooks, the ubiquitous small-business accounting tool. Over the years, the company added inventory management and CRM tools, attracting ever-larger customers in the process.

But NetSuite saw more opportunities for growth. “As the product starts to get very complete and robust, what you increasingly find is that the places where there are gaps in your product — where the potential client asks for some function you don’t have — are more and more vertical-specific,” says CFO Ron Gill. For example, software companies tend to look for tailored tools to help with revenue recognition. “When you look at the product, you might not see that need,” says Gill. “But if you’re selling to a lot of software companies, you might have 10 sales reps come back and say that what their clients wanted was this particular tool.”

To identify and fill such gaps, NetSuite has undertaken a complete reorganization focused on industry verticals. It started last year with sales, which previously had a geographic orientation. This year the rest of the company is following suit. Staffers in marketing, product support and implementation, and product development are now dedicated to one of six industries: professional services, software, e-commerce, manufacturing, wholesale distribution, or general business.

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The move has had the intended effect, with sales and support staff reporting lots of customer requests for new tools and tweaks to the product. The demand has prompted NetSuite to hire additional developers and open a development center in the Czech Republic.

But the reorganization has also had a surprising benefit for finance, as it has dramatically improved the CFO’s ability to help allocate resources, according to Gill. For example, the marketing spend has become much more efficient. “I can now see where a marketing dollar is most effective at generating a lead and where we turn leads into deals fastest,” says Gill. “It really helps us understand where resources can be deployed most effectively, rather than going by whoever shouts the loudest.”

The change has also generated healthy competition among staffers dedicated to each vertical, adds Gill, which in turn obliges the management team and finance department to be especially precise in their analysis and thoughtful in their decision making.

A downside of the reorganization is that it has placed additional pressure on the finance department, which has remained centralized to preserve a standard approach to reporting and analysis companywide. Finance staffers are finding themselves pulled in all directions as each group seeks its own data for budgeting and planning, says Gill. “There are six times as many people looking for data, which means the finance department has a lot more customers.”

Still, despite the increased demands, the CFO is enthusiastic about the reorganization, and expects the shakeup to help NetSuite identify future areas for growth. “We plan to build a road map for each of the verticals we have, but we’re also identifying the places where we don’t currently play,” says Gill. “I would look for us to add verticals in the future.”

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